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TMI Blog2014 (10) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... plating, varnishing, enameling and coating by plastic etc. Thus it is clear that not only the cold rolled products and hot rolled products have different characteristics, but they have different uses and different commercial identity. Therefore, we hold that cold rolling of HR Coils results in emergence of a new product with distinct and different commercial identity, characteristics and uses and therefore this process would amount to manufacture. In view of this, we uphold the Commissioner’s finding on this point. Shortage of 1145.35 M.T. of HR Coils - Held that:- from the correspondence between the appellant and M/s HSC it is also seen that in December 2000, the appellant had asked M/s HSC to return the quantity without any job work and according to the appellant, the coils in respect of which the Cenvat credit had been taken, have been sold on payment of duty under the invoices issued under Rule 57AB. The Commissioner while confirming the demand on the entire quantity of 1145.35 M.T. of HR Coils had not considered, the appellant s plea that out of 1145.35 M.T. of HR Coils, 1106.34 M.T. of HR Coils had been sold as such under invoices issued under Rule 57AB and the balance qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re manufacturers of CR Coils/CR Sheets/CR Strips and also Silicon Electrical Steel falling under sub-heading 7211.51 and 7226.10 respectively of the Central Excise Tariff. The principal raw material of the appellant is HR Coils which they purchased from Steel Authority of India Ltd. The period of dispute in this case is from September 2000 to November 2000. The appellant subject the HR Coils purchased by them to straightening and slitting and, thereafter, the HR strips after being subjected to pickling process by treatment with Hydrochloric Acid or Sulphuric Acid, are subjected to cold rolling to the desired thickness. The cold rolled strips are annealed in the annealing plant to soften the material and the annealed strips are passed in Pinch Pass Mill where a very minor reduction is given to impart hardness on the surface of these strips. These strips after being slitted to the required size are tested for quality control and if there is no defect, the same are accounted for in the RG-1 register. 1.2 On 30th November 2000, the appellant s factory was visited by the Jurisdictional Central Excise officers and they checked the stock of the finished goods as well as raw material. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant had issued the challans on their letter heads which were not bearing any serial number. Shri Manoj Kumar on 20th April 2001 also produced a letter dated 27/11/2000 of the appellant, wherein the appellant had requested M/s HSC not to process any material, as they intended to call back that material as such. The endorsements on the job work challans also indicated that the material had been sent back to PSPL during December 2000 without undertaking any uncoiling and cutting. However, looking to the size of the premises of M/s HSC - which was about 600 sq. yards and in which the office as well as one de-coiling machine, one straightening machine and cutting machine was also installed, the appellant s claim that 1106.34 M.T. of HR Coils were stored at those premises during November 2000 appeared to be highly doubtful. It was also found that there was facility of cutting of de-coiling and cutting of HR Coils in the factory of the appellant and for this reason also the appellants claim regarding sending of 1106.34 M.T. of HR Coils to M/s HSC for de-coiling and cutting appeared to be doubtful. It, therefore, appeared that the cenvated HR Coils found short had not been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at credit demand of ₹ 50,16,836/- was confirmed against the appellant company alongwith interest thereon under Section 11AB and beside this, penalty of equal amount was imposed on them under Rule 173Q (1) and Rule 57AH (2) of Central Excise Rules, 1944 readwith Section 11AC of the Central Excise Act. Penalty of ₹ 20,00,000/- was also imposed on M/s HSC under Rule 209A of Central Excise Rules, 1944. 1.9 The appellant company filed an appeal before the Tribunal against the above order of the Commissioner. The Tribunal vide final order dated 21/08/03 remanded the matter to the Commissioner for denovo adjudication after considering the appellant s plea that the conversion of HR Coils into CR Coils/ Sheets/Strips does not amount to manufacture and hence no duty would be chargeable. The Tribunal also directed that after deciding this issue, other issues regarding shortage of cenvated raw material and shortage of finished products may also be examined. 1.10 The matter was adjudicated denovo by the Commissioner vide order-in-original dated 13/05/04 by which the Commissioner again confirmed the duty/Cenvat credit demand of ₹ 50,16,836/- against the appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers and as such at the time of the officers visit to the factory, this quantity of CR Strips was available, that this quantity had subsequently been cleared on payment of duty and, hence, duty cannot be demanded on the same once again, that as regards allegation of clandestine removal without payment of duty of CR Strips under four computer generated invoices bearing Sl. No. 1289 dated 09/11/2000, the same were not invoices at all and had been made only for the purpose of calculation and as such no goods had been cleared under those invoices, that the Department could have easily verified the original invoices by conducting inquiries with the customers mentioned therein or with the owners/drivers of the trucks whose registration number appear on the same, but the show cause notice is silent about any such inquiry, that as regards allegation of clandestine clearance of 121.77 M.T. of CR Strips under 8 bills of bearing No. 1412 dated 28/11/2000, but issued to different parties, these bills do not represent the actual invoices and there were no clearances under the same, as the same had been generated by the software engineer while carrying out repairs of the computer, that as rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnment of HR Coils to M/s HSC, Ghaziabad for slitting and that this is the case where the Cenvat credit availed inputs had been sold of without reversal of the credit. He, therefore, pleaded that there is no infirmity in the impugned order. 5. We have considered the submissions from both the sides and perused the records. 6. Coming first to the question as to whether conversion of HR Coils into CR Sheets/Strips amounts to manufacture or not, this is one of the point which the Commissioner had decided in the impugned order in pursuance of the Tribunals remand order No. 623/2003-NB dated 21/08/03. Though this point was not argued in course of hearing, in the memorandum of appeal this point has been raised in the ground of appeal and, therefore, in our view, it is necessary to deal with the same. 6.1 The appellant purchased HR Coils which after un-coiling and slitting are subjected to the process of pickling by treating the same with hydrochloric acid or sulphuric acid to remove the oxide layer from the surface. After this process the strips are subjected to cold rolling in the cold rolling mill to the desired thickness. The cold rolled strips are annealed in the annealing p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent characteristics, but they have different uses and different commercial identity. Moreover, Harmonized System of Nomendature is an international catalogue of the commodities traded across the world and if HSN treats hot rolled and cold rolled steel products as different and assigns different product codes to them, the same have to be treated as different and distinct products. Therefore, we hold that cold rolling of HR Coils results in emergence of a new product with distinct and different commercial identity, characteristics and uses and therefore this process would amount to manufacture. In view of this, we uphold the Commissioner s finding on this point. 7. Coming to the alleged shortage of 1145.35 M.T. of HR Coils, there is no dispute about the fact that at the time of officers visit to the factory, while there was entry in the RG-23A register regarding the receipt of this quantity of HR Coils and the Cenvat credit in respect of the same had also been availed, this quantity of the coils could not be found in the factory. Subsequently, the appellant explained that out of this quantity a quantity of 1106.34 M.T. had been sent to M/s HSC, Ghaziabad for slitting on job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the shortage of 4.296 M.T. of HR/CR Scrap and 570.833 M.T. of CR Strips, there is no dispute that at the time of officers visit to the factory this quantity could not be located and the officials of the appellant company who were present had accepted the shortage and could not give any explanation for the same. The appellant s plea is that 4.296 M.T. of HR/CR Scrap was lying scattered at various places in the factory and similarly 570.833 M.T. of finished CR Strips had been reissued to the manufacturing area for further processing as per the requirement of the customers. Both these pleas are difficult to believe. As per the appellant s own admission, the entry in RG-1 register is made only after their inspection by the quality control department and only when the finished goods they pass the quality control test, their quantity is entered in the RG-1 register. If the some quantity of CR Strips has been manufactured as per some specifications given by the customers, at the time of quality control checks the goods would be examined with regard to the customer s specifications and if the goods are not according to the customer s specifications the same would not be entered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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